Tag: MMA

MMA denies US suggestion it has knowledge of terrorist funding

The Maldives Monetary Authority (MMA) has rejected claims by the US State Department that it has any knowledge of funds being used to finance terrorist activities abroad (May 11).

The MMA’s statement came in response to a report from the US government that the authority believed funds from the Maldives were being used to sponsor terrorist activities.

“The MMA has neither received nor communicated any information regarding confirmed operation of terrorist financing activities,” said the MMA.

The US Country Reports on Terrorism 2013 claimed that criminal proceeds were coming from hawala systems (informal money transfer networks) to transfer money between islands.

“Maldivian authorities believe that funds are currently being raised in Maldives to support terrorism abroad; however, there is no reliable information regarding the amounts involved,” read the US report.

“While no official studies yet have been conducted, the Maldivian Central Bank believes that criminal proceeds mainly come from domestic sources, as a large percentage of Suspicious Transaction Reports (STRs) are related to Maldivians,” it continued.

The Maldivian Democratic Party (MDP) has today cited the US report as evidence that the government is not doing enough to combat terrorism.

“The Maldivian Democratic Party strongly condemns the government’s failure to bring an end to terrorist and extremist activities as funds are raised in the Maldives to fund terrorism abroad,” read a press release today.

The party suggested that examples of Maldivians engaging in extremism and terrorism was on the rise, suggesting the government was not doing enough to resolve organised criminal activity in the country.

In response to the US report, the MMA has contended they have not received any confirmed suspicious transaction reports related to terrorist financing in the Maldives through formal or informal money transfer networks.

The authority also expressed confidence in the industry’s framework for preventing such operations, adding that any companies that are under their supervision are subject to the Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) obligations.

AML/CFT legislation drafted by the MMA was passed by the People’s Majlis last month and ratified by President Abdulla Yameen on April 13.

The new law introduced rules governing financial transactions and the inflow and outflow of money from the Maldives.

“We are pleased to note that most of these financial institutions have internal policies, procedures and programs to implement those obligations,” the MMA statement added.

The US State Department had further noted growing concern since 2010 “about the activities of a small number of local violent extremists involved with transnational terrorist groups”.

“There has been particular concern that young Maldivians, including those within the penal system, may be at risk of becoming radicalized and joining violent Islamist extremist groups. Links have been made between Maldivians and violent extremists throughout the world,” the report stated.

The department also suggested that the Maldives has few laws which effectively control the movement of people and money into and out of the country, adding that due to its “sprawling island geography and insufficient technological capabilities” the coastguard could not effectively patrol the territory.

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Slippages in revenue or expenditure will undermine debt sustainability: MMA macroeconomic report

Shortfalls in revenue or overruns in expenditure in 2014 “will undermine medium-term debt sustainability” and adversely affect the exchange rate and prices, the Maldives Monetary Authority (MMA) has cautioned in a report on macroeconomic developments in 2013.

On the outlook for the economy in 2014, the report released this week noted that the fiscal deficit was projected to decline to 3.2 percent this year from 4.7 percent in 2013 on the back of higher revenue from tourism-related taxes and payments for resort lease extensions as well as rationalisation of subsidies.

“Despite this positive outlook, there is a considerable amount of uncertainty surrounding the 2014 budget. Overruns in current expenditure will most likely lead to financing difficulties for the government or further crowding out of the private sector,” the central bank warned.

“Any setback to fiscal consolidation either due to slippages in revenue or current expenditure will undermine medium-term debt sustainability and will have adverse implications for exchange rate and prices.”

Outlook for 2014

Economic growth in 2014 is projected at 4.5 percent, an increase of 0.8 percent from the previous year.

“Growth will be driven by the continued expansion of tourism activity which is to be mainly supported by the robust growth of Chinese tourists,” the report explained.

“In 2014, growth is also expected to benefit from the recovery of construction sector which registered declines in the past two years. Activity in the construction sector is expected to recover due to the easing of material shortages and the continued expansion of residential construction projects amid improved bank credit to the sector.”

While the transport and communication sectors are expected to grow “in tandem with better prospects for the tourism industry,” the report noted that primary fishing activity is projected to decline slightly.

Inflation is expected to “remain moderate” in 2014, which “largely reflects the weaker outlook for global commodity prices”.

However, lower commodity prices were expected to “offset the upward impact of one-off factors such as the introduction of GST on communication services and reversal of import duty for certain goods during the year.”

The current account deficit is expected to widen by 16 percent to US$269.9 million this year as “improved receipts from tourism is insufficient to off set the increase in imports, interest payments and remittance outflows.”

While imports are expected to grow “in line with the projected increase in economic activity from tourism, construction and government sectors,” exports are expected to decline on account of a projected decrease in fish catch and global tuna prices.

“Meanwhile, gross international reserves are projected to improve in 2014 mainly due to inflows from the planned new revenue measures stemming from the tourism sector. In line with this improvement, reserves in terms of months of imports, are also projected to increase slightly,” the report stated.

Revenue and expenditure

While total revenue excluding grants reached MVR11.5 billion (US$745 million) last year – an increase of 18 percent from the previous year – revenue collection was lower than anticipated “owing to delays in the implementation of the planned new revenue raising measures as envisaged under the budget.”

Tax revenue accounted for 75 percent of total revenue in 2013 while non-tax revenue “declined marginally” to MVR2.8 billion (US$181 million).

Total government expenditure in 2013 was MVR13.5 billion (US$875 million), which was four percent below the target.

The report explained that capital expenditure was significantly lower than expect, “which offset sizeable overruns in current expenditure.”

“Meanwhile, although the government repaid some of the unpaid bills from previous years, a further build-up of arrears took place in 2013 as well and if these are considered total expenditure for 2013 will be much higher than estimated,” the report stated.

Current expenditure accounted for 84 percent of total government spending in 2013, reaching MVR11.4 billion (US$739 million), which was 11 percent in excess of the budgeted amount.

Salaries and allowances contributed the largest share at 48 percent of current expenditure, “reflecting the bulky public sector,” followed by subsidies and social welfare contributions at 18 percent, administrative costs at 13 percent, and interest payments at eight percent.

As large debt repayments were made between December 2012 and February 2013, interest payments in 2013 declined by 19 percent compared to the previous year and stood at MVR893.6 million (US$57.9 million).

Debt and deficit

As a result of “slippages in both revenue and expenditure” in 2013, the fiscal deficit is currently estimated at 4.7 percent of GDP, down from 9.2 percent in 2012.

The budgeted target for 2013 was however 3.6 percent.

The report noted that total debt of the government reached 78 percent of GDP at the end of 2013 as a consequence of “the sustained high budget deficit” over the past years.

Domestic debt accounted for 58 percent of total public and publicly-guaranteed debt.

“In 2013, the financing requirement of the government was met almost entirely through domestic sources: mainly through the issuance of Treasury bills (T-bills) to the domestic market and monetisation,” the report explained.

Net credit to the government by the MMA “increased from MVR4.7 billion at the end of 2012 to MVR6.0 billion at the end of 2013,” the report revealed.

The total outstanding stock of T-bills meanwhile reached MVR8.2 billion by the end of 2013.

“A large part of this increase was attributable to the increase in investments by other financial corporations and public non-financial corporations, which can be seen from the increase in their share of holdings (as a percent of total outstanding T-bills) from 28% at the end of 2012 to 44% at the end of 2013,” the report stated.

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Tourist arrivals increase six percent in March

Tourist arrivals in March increased six percent in annual terms but declined five percent in monthly terms, reaching 105,560 guests during the month, according to the Maldives Monetary Authority’s (MMA) monthly economic review released yesterday (April 30).

“The annual increase was due to the rise in the number of arrivals from China which offset the decline in arrivals from Europe,” explained the central bank’s monthly update of “developments in key economic sectors”.

Total bednights meanwhile rose two percent in annual terms, “while the average duration of stay declined marginally.”

The occupancy rate also decreased slightly compared to March 2013, falling to 82 percent. The report noted that the operational capacity of the tourism industry rose during the review month.

The Tourism Ministry meanwhile revealed yesterday that tourist arrivals in the first quarter of 2014 increased 9.7 percent compared to the same period of 2013, reaching a total of 321,561.

Europe retained the largest market share, accounting for of 51.3 percent of all arrivals to the Maldives with a total of 321,561 tourists during the first quarter of the 2014, the Tourism Ministry stated.

Asia and the Pacific recorded a growth rate of 24.4 percent at the end of first quarter of 2014, bringing in an additional 26,606 tourists to reach a total of 135,839.

The region accounted for 42.2 percent of arrivals to the Maldives at the end of first quarter of 2014.

According to the Tourism Ministry, the Chinese market expanded by 24 percent with an additional 16,960 tourists compared with the same period of 2013.

Statistics from the Tourism Ministry show that 331,719 Chinese tourists visited the Maldives last year, which was a 44.5 percent increase from the previous year.

Chinese tourists accounted for 29.5 percent of all tourist arrivals in 2013.

The Maldivian economy is largely dependent on tourism, which accounted for 28 percent of GDP on average in the past five years, and generated 38 percent of government revenue in 2012.

Inflation

Meanwhile, in the second largest industry, the volume of fish exports as well as earnings “fell significantly by 80 percent and 66 percent respectively” compared to March 2013.

The decline was accounted for by the fall in the volume of and earnings from “fresh, chilled or frozen tuna exports.”

“The International Monetary Fund (IMF) commodity price index fell marginally in monthly and annual terms during March 2014,” the central bank noted.

“The monthly decline was mainly due to the fall in both petroleum and metal prices which off set the increase in food prices during the review month.”

The price of crude oil in March 2014 was US$104 per barrel.

The inflation rate in the Maldives meanwhile decelerated to 2.3 percent in March from 3.4 percent the previous month.

“This was largely contributed by the slower growth in food prices, especially fish, and also due to the moderate growth in the prices charged for housing and utilities,” the report explained.

“Similarly, the rate of inflation declined marginally in monthly terms during March 2014, which was also due to the slower growth in fish prices.”

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Newly appointed MMA governor reveals plans to strengthen economy

The newly appointed Governor of Maldives Monetary Authority (MMA) Dr Azeema Adam has stated that she will ensure firm action is undertaken to strengthen both the economy and its currency.

“We need to strengthen foreign exchange market regulatory framework and establish a sufficient monetary policy framework in order to maintain the value of rufiyaa,” she told local media yesterday.

Azeema added that the strengthening of these frameworks would also assist in reducing inflation and the rise in prices of general commodities, as well as echoing the concerns of her predecessor regarding monetisation.

“Printing money to overcome the budget deficit is something that brings down the value of the Maldivian rufiyaa. Therefore, this needs to brought to an end.”

“In order to do so, the MMA will assist the government to finance their budget deficit through a market mechanism,” she revealed.

She added that this will be difficult to accomplish without decrease government spending, while also noting the importance of the ratification of the new MMA Act which has been recently drafted.

Azeema also pledged to bring an end to dollar transactions on the black market, noting the importance of maintaining the value of local currency in a country like the Maldives which strongly depends on foreign currency.

The MMA’s recent balance of payments projections estimate that the country’s current account deficit will widen to US$562.5 million in 2014, which is equal to 22 percent of GDP.

She pledged to bring down the expense of running the central bank, stating that decreasing spending throughout the state bodies is imperative to strengthening the country’s economy.

Azeema stated that, although Maldives has a comparatively high level of investments in tourism and other sectors, it has so far failed to be reflected in the country’s financial status.

Productivity increasing

Due to the rapidly developing tourism sector, productivity of the Maldives will increase by 4.5 percent by the end of 2014, she said.

“At the end of 2013 we had US$368 million. Our estimate is that this will rise to 400 million dollars by the end of this year. Looking at how much is imported from this reserve, this is the import of about 2 or 3 months,” local media reported the new governor as saying.

Dr Azeema estimated that, compared to 2013, the current account deficit of the country will increase by 16 percent this year, while the official reserves exceed this. She said that this estimate is made based on the developing tourism sector, and the increased earnings that the government is acquiring from the field.

She went on to reveal that the major work the MMA will currently undertake is to introduce new insurance services and to establish further Islamic financing instruments.

The MMA will assist banks in releasing more loans to individuals by decreasing the minimum reserve requirement that they have to keep deposited at the central bank, she said.

“We need to strengthen the financial sector through revisions, this is a work we must undertake. We do not see big investments being made in the financial sector. However, we need to attract investments into this sector too,” Azeema told the press.

The governor stated that, where required, the central bank will also work to revise necessary laws and regulations in an attempt to strengthen the financial sector. She stated that this would assist the government in obtaining funds to implement various projects, while also being of help to small and mid-level businesses.

She highlighted the importance of creating more public awareness about the financial sector as well as encouraging a mentality of keeping savings from their earnings.

She further said that the MMA would encourage the use of electronic payment systems as opposed to cash and cheques. She stated that more convenient and efficient electronic payment systems will be introduced by the central bank, adding that this would be more secure than cash and cheque transactions.

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Tourist arrivals rose six percent in February

Tourist arrivals in February increased by five percent from the previous month and six percent in annual terms, according to the Maldives Monetary Authority’s (MMA) latest monthly economic review.

“The annual increase was due to the rise in the number of arrivals from Asia and Europe,” the central bank’s monthly report noted.

While total bed nights in February rose five percent compared to the same period last year, the occupancy rate rose three percent from February 2013 to 89 percent this year.

The average duration of stay however “declined marginally in annual terms during the review period,” the report stated.

The MMA had previously revealed that tourist arrivals rose 17 percent in 2013 compared to the previous year “mainly due to the large increase in tourist arrivals from China, coupled with a slight growth in arrivals from Europe.”

Statistics from the Tourism Ministry show that 331,719 Chinese tourists visited the Maldives last year, which was a 44.5 percent increase from the previous year.

Chinese tourists accounted for 29.5 percent of all tourist arrivals in 2013.

In November 2013, the Finance Ministry revealed that the tourism industry’s GDP growth in 2012 declined by 0.1 percent following 15.8 percent growth in 2010 and 9.2 percent in 2011.

Despite negative growth in 2012, the Finance Ministry estimated that the industry would have expanded 5.5 percent in 2013 and forecast a growth rate of 5.2 percent for this year.

The average duration of stay has however fallen from 8.6 days in 2009 to 6.7 days in 2012, and 6.3 days in 2013.

According to the annual tourism yearbook published by the Tourism Ministry, the average occupancy rate of all tourist establishments in 2012 was 2.5 percent below the previous year at 70.6 percent.

The Maldivian economy is largely dependent on tourism, which accounted for 28 percent of GDP on average in the past five years, and generated 38 percent of government revenue in 2012.

Meanwhile, in the second largest industry, the volume of fish exports increased by nine percent in February compared to the previous year “largely contributed by the increase in the volume of fresh, chilled or frozen tuna exports.”

“However, earnings from fish exports declined by 25 percent during the same period, due to the fall in both the volume and earnings from canned or pouched tuna exports,” the review revealed.

“Additionally, earnings from yellow fin tuna exports also declined during this period compared to 2013.”

The rate of inflation – measured by the annual percentage change in the consumer price index in Malé – rose to 3.4 percent in February from 2.6 percent in January.

“This was largely due to the increase in fish prices,” the report explained.

“Similarly, the rate of inflation increased in monthly terms during February 2014, which was also due to the rise in fish prices.”

Public finance

The economic review noted that government expenditure “more than doubled” in January to MVR1.9 billion compared to the same period last year.

Total revenue fell by 11 percent to MVR1 billion “largely due to the 27 percent decline in business profit tax (BPT) [receipts].”

“Additionally, non-tax revenue also fell, owing to the significant decline in resort lease rent. As for the increase in expenditure, it was mainly due to the increase in subsidy payments,” the report stated.

As a result of “increased investments in T-bills by commercial banks, other financial corporations and public non-financial corporations,” the review noted that the total outstanding stock of government securities – treasury bills and bonds – rose nine percent in annual terms and 10 percent in monthly terms during February.

The trade deficit meanwhile narrowed by 29 percent during February compared to the previous year.

“This was due to the significant decline of 26 percent in imports which off set the 16 percent decline in exports. The decline in imports was contributed by the fall in petroleum products,” the report explained.

“Gross international reserves increased in both monthly and annual terms by 2 percent and 13 percent respectively and reached US$391.1 million at the end of February 2014. Reserves in terms of months of imports also rose in both monthly and annual terms to 2.7 months at the end of the same period.”

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Anti-money laundering and combating financing of terrorism bill passed

Parliament yesterday passed legislation on anti-money laundering and combating the financing of terrorism (AML/CFT) following review by the national security committee.

All 53 MPs in attendance at yesterday’s sitting voted in favour of passing the bill.

Presenting the committee report (Dhivehi) to the Majlis floor, MP ‘Reeko’ Moosa Manik, chair of the national security committee, explained that the legislation introduces rules governing financial transactions and the inflow and outflow of money from the Maldives.

The bill will also address the persisting dollar shortage, the foreign currency black market, and counterfeiting of dollars, Moosa added.

Moreover, a limit would be placed on the amount of cash that can be taken out of the country, which has to be declared to customs, the opposition Maldivian Democratic Party MP said.

The new law would also benefit investors as it would inspire confidence in the legal system and offer security to foreign investments, Moosa said.

In the ensuing debate, Jumhooree Party Leader Gasim Ibrahim contended that the parallel market for dollars sprang up as a result of the Maldives Monetary Authority (MMA) not allowing the price of dollars to fluctuate.

Gasim suggested that the economy suffered adverse effects due to discrepancies between monetary and fiscal policy.

“Negative consequences”

Moosa noted that noted that a high-level delegation from the Asia/Pacific Group on Money Laundering (APG) had urged MPs to expedite the passage of the legislation.

MPs were warned of “negative consequences” such as restrictions in conducting international financial transactions and credit card transactions as well as transferring money to overseas bank accounts should the bill not be passed before June.

In a meeting with committee members in February, APG Co-chair Andrew Colvin warned that the organisation along with the Financial Action Task Force (FATF) “would be left with little option but to take certain measures that would be negative for the Maldives” should the legislation not be passed.

APG Executive Secretary Dr Gordon Hook noted that implementing AML/CFT laws was “an obligation that the Maldives undertook voluntarily when you joined the APG in 2008″ as a condition of membership.

“There are 41 countries in the APG. They include every country in the Asia/Pacific region with the exception of North Korea and three tiny Pacific states. Among those 41 countries of which Maldives is a member, you are the only country without a comprehensive AML/CFT framework,” he observed.

The anti-money laundering bill was submitted to parliament in late 2013 and sent to the national security committee for further review.

The absence of legislation “makes Maldives very vulnerable to money laundering and terrorist financing,” Dr Hook said.

He added that the vulnerabilities were identified by the International Monetary Fund (IMF) in a report prepared in 2011.

MMA Assistant Governor Neeza Imad meanwhile told MPs that the Maldives received a very low rating in an assessment by the APG in 2011, after which the central bank began drafting legislation on AML/CFT.

Technical assistance was provided by the APG and the IMF, she noted.

Countries that are listed by the APG for non-compliance with its standards on AML/CFT face “hindrances” in securing foreign direct investment, opening accounts overseas, and conducting international financial transactions, Neeza said.

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Majlis committee approves candidates for PIC and MMA, rejects prosecutor general nominee

Parliament’s independent commission’s oversight committee has interviewed and decided upon appointees to the posts of Maldives Monetary Authority (MMA) Governer, and Prosecutor General (PG), as well as a member of the Police Integrity Commission (PIC).

The committee’s Deputy Chair Rozaina Adam told Minivan News that the committee had approved nominees based on a grading scheme, and that each nominee needed to get over 75 percent of marks to be approved.

“Nominees for two of the posts we discussed yesterday received the required percentage of marks, the other didn’t. Approvals are based on a preset grading scheme, and not on members’ opinions,” Rozaina explained.

The committee approved Dr Azeema Adam for the post of Governer at MMA and Aiminath Rukshana to be a member of the five member PIC.

Presidential nominee for the post of Prosecutor General, Maumoon Hameed, did not receive sufficient marks for approval.

Dr Azeema Adam has served at the MMA since 1991. She is currently serving as Assistant Governor and Chief Economist, Monetary Policy, Research and Statistics at the MMA.

Adam has a PhD in Economics from the University of Canberra and a Masters Degree in International Development and Finance from the University of Leicester.

Her nomination for the governors role came after Yameen had previously forwarded the name of Ibthishama Ahmed Saeed, an associate director at the Bank of Maldives, before withdrawing it amid suggestions the candidate was not qualified for the role.

Previous governor, Dr Fazeel Najeeb, resigned in December citing personal reasons – though he urged the government to reduce expenses and refrain from printing money during his final press conference.

Presidential nominee to the police watchdog body, Aiminath Rukshana, also received the required 75 percent marks. Rukshana is originally from Liyaage in Maafannu ward of Malé City.

Presidential nominee to the post of prosecutor general, lawyer Maumoon Hameed was not able to receive the required percentage of votes.

The PG’s position has been vacant since former PG Ahmed Muiz resigned from the post prior to a scheduled no-confidence vote. The duties of the PG are currently being temporarily conducted by Deputy Prosecutor General Hussain Shameem.

After a running dispute with the PG’s Office over the acceptance of cases following the expiry of the constitutionally mandated period for appointing a new PG, the Criminal Court resumed accepting new cases after repeated interventions by the Supreme Court.

President Abdulla Yameen has recently accused the opposition Maldivian Democratic Party – holder of a majority of seats in the oversight committee – of obstructing the government’s attempt to appoint a new PG.

Lawyer Maumoon Hameed is the son of the Gayoom administration’s Atolls Minister Abdulla Hameed, and the nephew of incumbent President Yameen and ruling Progressive Party of Maldives leader Maumoon Abdul Gayoom.

MP Rozaina Adam stated that the committee will present the report on its decision to the parliament speaker on Tuesday.

A final decision on the appointments will be taken through a parliamentary vote. The vote has thus far not been scheduled on agenda.

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President replaces two members on MMA board of directors

President Abdulla Yameen has on Monday replaced two members on the board of directors of the Maldives Monetary Authority (MMA).

The representative of the Finance Ministry – the ministry’s permanent secretary – has been replaced with State Minister for Finance and Treasury Ahmed Munavvar.

Additionally, the private sector representative has also been changed. The seat formerly filled by Damas Company owner Mohamed Solih has been replaced with Inner Maldives Deputy Managing Director Abdulla Giyas Riyaz.

The remaining four positions on the board are filled by Deputy Governer Aishath Zahira, Assistant Governer Dr Azeema Adam, Minister of Youth and Sports Mohamed Maleeh Jamaal and former Minister Hussain Hilmy.

While the MMA Governor is also mandated to be part of the board, the position still remains vacant after former Governor Fazeel Najeeb resigned from his position.

Dr Azeema’s name was given to the People’s Majlis last month as President Yameen’s nominee for the governor’s post after Ibthishama Ahmed Saeed – an associate director at the Bank of Maldives – had been forwarded for the role before withdrawing her name amid suggestions she was not qualified for the role.

Today’s reshuffle is the second round of changes that the current administration has brought to the MMA board since it assumed power in November 2013.

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Pensions office performs U-turn on benefit increase

After initially reporting that the promised pension increase from MVR2300 to MVR5000 could not be done this month, the Maldives Pension Administration Office (MPAO) today confirmed that it is working to transfer the MVR5000 by tomorrow.

The CEO of the office had yesterday told Haveeru that it had not received the additional funds for the increase and that it would therefore transfer the current MVR2300, giving the rest when the government released additional funds.

“They are doing this to fulfill a government pledge. This has nothing to do with the pension fund. We will not increase it to MVR5000 by taking money from that fund. What we will do is transfer it when the government provide us with it,” Manik was quoted as saying.

The state funded pension for all citizen’s above the age of 65 was introduced in 2009 at MVR2,000, and was later increased to MVR2,300 through an amendment to pension legislation.

A further increase to MVR5000 – starting from March 2014 – was an election pledge of President Abdulla Yameen, though changes to the amount disbursed from the existing pension funds will require another amendment to the act.

Cabinet minister Ahmed Adeeb has recently assured that the increase would take place in March as promised, saying that it can be funded through a sustainable model based on long term bonds and T-bills.

Adeeb also talked about the prospect of combining various funds such as housing, health insurance, and pension funds into a single fund.

The government had already allocated MVR470 million (US$ 30.5 million) in the state budget for the MVR2,300 allowance (US$149). These funds will now be invested in the retirement pension fund or in financial instruments such as T-bills in order to generate the monthly MVR5000 stipend, Adeeb has said.

Following Manik’s comments yesterday, Adeeb told Haveeru that the delay was due to the first of the month falling on the weekend and “because it is a new allowance”.

Yesterday, MPAO CEO Manik stated that eighty percent of the pension funds are already being invested in T-bills sold by the government to finance the budget deficit, and that discussions with the government are underway to invest the rest of the funds in bonds.

While the government maintains this to be a sustainable model of financing the increase in pensions, critics have argued that, with a MVR1.3 billion (US$84.3 million) deficit budget, the move will plunge the country further into debt.

“These are loans, and taking loans is acceptable to invest in to increasing productivity. But this is not such an investment, this is something the government is spending. Eventually people will have to bear the burden of this,” former Economic Development Minister Mahmud Razee has remarked.

Last December, the central bank and regulator – the Maldives Monetary Authority – advised the state to pay all due treasury bills and treasury bonds and to turn existing short-term debts into long-term ones.

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